A Low Point For The High Street: ASOS acquisition of Topshop signals end of brick and mortar retail

February 19, 2021

2 min read

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What's going on here?

ASOS has announced its ÂŁ295m acquisition of four brands from Arcadia Group, which entered administration in November 2020 (to see our report on that, click here). The online retailer will acquire the Topshop, Topman, Miss Selfridge and HIIT brands but not their high street stores.

What does this mean?

This is the first time ASOS has acquired another brand, representing a departure from its previous strategy of selling own-brand items while also hosting third-party labels. The retailer’s chief executive Nick Beighton said: “The acquisition of these iconic British brands is a hugely exciting moment for ASOS and will help accelerate our multi-brand platform strategy” to become “the number one destination for fashion-loving 20-somethings throughout the world”. The deal will result in around 70 store closures and 2,500 job losses. It came in the same week as Boohoo’s ÂŁ55m acquisition of Debenhams’ brand but not its stores, which will result in 118 outlet closures and 12,000 job cuts.

Pre-COVID, consumer shopping habits were already shifting from in-person to online, with online sales increasing by 324% between 2009-2019. This shift has gained significant momentum throughout the pandemic as online shopping has been the only option. This trend is indicated by the extreme divergence in revenue between online retailers and those that rely on in-person sales. Online retailers including ASOS have seen sales soar, while brick and mortar retailers such as Debenhams have suffered (to see our reports on that, click here and here).

What's the big picture effect?

This acquisition is a stark manifestation of the ongoing shift from high street to online shopping, which will have significant consequences for businesses, employees and customers.

The shift’s polarising effect on the retail industry means that thriving online retailers are increasingly well-placed to buy up failing high street retailers. This presents lucrative opportunities for them to grow and appeal to new markets. To see our report on Boohoo’s acquisition of Oasis and Warehouse in July 2020, click here.

The UK retail sector employs over 3m people, and many of these jobs will be lost. Cash-strapped retailers will continue to cut jobs to reduce costs, and store closures will reduce demand for workers. Store jobs are typically done by women, whereas warehouse and delivery jobs are more commonly done by men. Women will be disproportionately affected by the shift to online shopping, as while it will cause store jobs to become scarce, it will increase availability of warehouse and delivery jobs.

Importantly, this shift places considerable pressure on businesses to strengthen their approach to e-commerce. In-person sales are unlikely to return to pre-pandemic levels in the near future, and therefore a strong online presence is key to remaining competitive and staying afloat. This will be a particularly important strategic focus for brands with older target markets that are less familiar with online shopping, such as Debenhams. These brands will need to consider how they can make online shopping appealing and accessible to these customers. If the retail industry has learnt anything from the last year, it is that e-commerce is essential for survival during lockdown and beyond.

Report written by Isobel Deane

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